The Australian Government has increased the 32.5% tax threshold from $37,001 - $80,000 to $37,001 - $87,000.

What does this mean for employers?

The tax tables have changed for employees who earn over $80,000. You will need to download the updated tax tables from www.ato.gov.au/taxtables or contact your payroll software provider for the relevant update.

Do employers need to make any other adjustments?

The new tax tables are effective from 1 October 2016. Employers do not need to make any other adjustments or refunds as the ATO will refund any over-payment of tax when your employees lodge their 2016-17 income tax return.

Find out more via the ATO links below:

Budget Summary 2016


Small business

The turnover threshold to be classified as a small business entity will be increased from $2m to $10m from 1 July 2016. The increased threshold means businesses with an annual turnover of less than $10m will now be able to access existing small business income tax concessions including the:
  • Lower small business corporate tax rate (which will be reduced to 27.5% from the 2016/17 income year).
  • Simplified depreciation rules including the instant write off for assets costing less than $20,000 (only available until 30 June 2017).
  • Simplified trading stock rules.
  • Option to account for GST on a cash basis and pay GST instalments as calculated by the ATO.
  • Simplified method of paying PAYG instalments calculated by the ATO, and
  • Other tax concessions such as the extension of the FBT exemption for work-related portable electronic devices available from 1 April 2016.
However, the increased $10m threshold will not apply to the small business capital gains tax concessions. These concessions will remain available only for small businesses with a turnover of less than $2m or that satisfy the $6 million maximum net asset value test.

Unincorporated small business tax discount increased

The unincorporated small business tax discount will now be available to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5m. The discount is capped to a maximum of $1,000 per individual, per year.

Individuals and families

The taxable income threshold at which the 37% marginal tax rate threshold for individuals commences will increase from $80,000 to $87,000 from 1 July 2016.

Superannuation
  • The threshold at which high income earners will pay tax on their super contributions at a rate of 30%, will be lowered from $300,000 to $250,000 from 1 July 2017.
  • The annual cap on concessional (tax deductible) superannuation contributions will be reduced to $25,000 from 1 July 2017.
  • The tax exemption on earnings of assets supporting Transition to Retirement Pensions will be removed from 1 July 2017 and the normal tax rate of 15% will apply.
  • A lifetime cap of $500,000 on non-deductible contributions will be introduced effective from 3 May 2016. Contributions made from 1 July 2007 to commencement will count towards the cap, but cannot result in an excess. Future contributions exceeding the cap will need to be removed or be subject to penalty tax.
  • The current work restrictions on people aged 65 to 74 from making superannuation contributions for their retirement will be removed from 1 July 2017.
  • With effect from 1 July 2017 individuals with a superannuation balance less than $500,000 will be allowed to make additional tax deductible contributions where they have not reached their concessional contributions cap of $25,000 in previous years. Amounts will be carried forward on a rolling basis for a period of five consecutive years.
  • From 1 July 2017 all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions. This effectively allows all individuals, regardless of their employment circumstances, to make concessional superannuation contributions up to the concessional cap.
  • A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners from 1 July 2017. The LISTO will apply to members with adjusted taxable income up to $37,000 up to a maximum offset of $500.
  • From 1 July 2017, there will be increased access to the low income spouse (married or defacto) superannuation tax offset by raising the income threshold for the low income spouse to $37,000.
  • A maximum limit of $1.6m on the amount of accumulated superannuation an individual can transfer into the tax-free pension phase will be introduced from 1 July 2017. Subsequent earnings on these balances will not be restricted. Members already in the pension phase with balances above $1.6m will be required to reduce their pension balance to $1.6m by 1 July 2017.

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